I read an article recently in USA TODAY with the headline, “Expect Some Freebie Love when Buying a New Car.” The article mentioned the things dealers give away to reward customers, such as a free tank of gas, a second set of keys, floor mats and so on. The article also pointed out special perks, such as service vouchers, window tinting, manicures, fresh coffee and cookies. It even listed some extravagant incentives, such as big screen TVs and AK 47s!
This got me thinking about a couple of things. First, it shows how far we have come as an industry in trying to create happy customers after we have sold someone a car. I have seen it go from service-drive waiting rooms to nice furniture in the service lounge to donuts and bagels to lunch counters and big screen TVs to wireless Internet, all in an effort to build a pleasing environment for a previous sales customer. It also got me thinking on just how many of these rewards and perks are so poorly thought out. What is the purpose? Are we just spending money to make someone happy or is there a strategy behind these efforts and expenses?
Most of the rewards and perks mentioned in the USA TODAY article are like throwing darts when you don’t know what the target is. A reward is something someone earns for doing something you want them to do. A bribe is something we give to someone in advance and then hope that the desired behavior follows. A good example of this is when it comes to parenting. If you say, “Here’s some ice cream, so be quiet,” that is a bribe. On the other hand if you said, “Be quiet until we get home and I’ll give you some ice cream,” that is a reward. The items mentioned in the USA TODAY article were all bribes. Everything mentioned is nice but ultimately purposeless. If we are rewarding them just for buying a car, that’s great. If our objective is to create a customer for life, however, it’s going to take a much better plan than a free tank of gas.
Airlines and hotels do reward programs the best: “Fly on our plane, spend money with us and we’ll give you points for future travel.” The same works with hotel rewards: “Do the behaviors we want, book a room and spend money, and we will reward you with points you can use later.” Rewards work much better than perks to create a long-term relationship with a customer who has purchased a car.
When setting up a rewards program, deciding what’s important to you is the first thing you should do. If you follow the old theory of “Just sell the car — there are 10,000 people moving into this state every month,” then just stick with perks. If, on the other hand, you want to grow your business with a deep customer base that will support you in good times or bad, you may want to look at a program of rewards that will thank the customer every time they perform services with you.
Free floor mats are nice, but for the same investment we could give them a rewards card that can keep them coming back to the dealership for years. We give customers plenty of reasons to buy here — price, payments, terms, etc. — but very few reasons to service here. Why not design a program to keep the customer in your service drive for the life of their purchase? JD Powers states that if you keep a customer in your service drive twice a year for the entire time they own their vehicle, they will repurchase 86 percent of the time at your store. Take a minute and let that sink in. What a great way to incrementally grow your business.
There are many ways to design a program to give a customer a reason to service their vehicle at your store. Some of the best proven practices include lifetime engine and powertrain guarantees, oil change programs, rewards cards and customized prepaid maintenance packages. Many of these programs can be reinsured. These options are not perks, bribes or hit/miss. All of these have proven to keep the customer coming back year after year. They are trackable, effective and profitable.
So, before you spend $400 in marketing every month to get someone to walk in the door, think about designing a program with a long-range purpose behind it. Freebie love should last longer than a one-night stand. Design your vows and have a long-term marriage with all of your customers.